No profit for Taxpayers on GM Bailout

If the Treasury Department earned a profit by selling its shares in AIG, putting and end to the controversial bailout, this would not be the case with GM.

Back in 2009 the Obama administration offered GM a $49.5 billion bailout, to help the automaker avoid a sure death, but the automaker managed to pay back only $23.1 billion. Now the treasury department decided to sell its stake in GM over the next 15 months. GM will buy back 200 million shares, which is a little less than half, for $5.5 billion by the end of 2012 and the rest of 19% or 300.1 million shares are to be sold through 2013 and maybe 2014.

The government’s sell of GM shares means the beginning of a new era for the automaker, which has been labeled as ‘Government Motors’ due to this bailout. During the presidential campaign this year, Republican Mitt Romney said he would sell all GM shares even at a much lower price to get the feds out of the private sector. It seems that President Obama found Romney’s advice quite useful.

Even if GM will finally be a fully private enterprise, its name will still be tainted by the fact that it failed to pay back all the taxpayer money, owing the government $26.4 billion. GM will buy back the 200 million shares at the price of $27.50 per share and a total of $5.5 billion. But the rest of the shares will have to be sold at an average price of $70 so that the taxpayers would get their money back, which is quite impossible.

Although analysts predict a surge in GM share price of $33 on average in the following 12 months, it would still be a loss of around $6 billion for taxpayers. So without a miraculously increase in GM stock, the price of the GM bailout to taxpayers will be around $10 billion to $12 billion.

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